Mailings

Thursday 21 May 2009

Relaxation in SIPP borrowing rules

HMRC responds to SIPP investors’ concerns over ban on pension transfers due to borrowing limits on commercial property investments

At last there is some good news from HMRC. As reported in the trade press and now confirmed by HMRC, the rules surrounding commercial property borrowing limits for SIPPs have been relaxed. One very notable consequence of this decision is that it allows transfers of borrowing from one provider to another, where previously, this scenario was not possible.

The implication is very significant as SIPP investors who bought commercial property with a mortgage of up to 75 per cent loan to value before A-Day were often stuck in highly priced, uncompetitive products and can now be set free. Until now, investors were not able to transfer to a new SIPP provider because it would have invoked the more restrictive post A-Day borrowing rules and severe tax penalties.

Now, SIPPs can be transferred to take advantage of better administration and more competitive fees.

HMRC explained that the move is intended to strike a sensible balance between the desire to allow pension schemes the freedom to choose to take a certain amount of risk in their investment strategy and the need to guard against excessive borrowing. HMRC maintain their objective to ensure that the scheme is able to pay out a secure income for life to its members without compromise.

If you have any queries on these issues, please speak to your usual contact.

The IPS Partnership